Commodity Performance: Another Tough Month For Hard Assets…
August is drawing to a close, which makes it the perfect time to recap commodity performance from the past month.
But first, let’s discover how these assets performed overall…
As you can see, the Reuters/Jeffries CRB Index (blue line) experienced another hefty downturn in August. The decline has the commodity-focused index sitting at a paltry year-to-date gain of 3.66%.
You’ll also notice the S&P 500 (red line) furthered its advance over the CRB. Equities are clocking a respectful 8% gain since the start of 2014.
To see why the CRB gave up more ground last month, let’s cover August’s biggest commodity movers.
First, the top performers…
Coffee
As I mentioned in Wednesday’s report, coffee bulls are kicking up their heels again. The invigorating bean tacked on gains of 10.4% in August as investors digested Brazilian harvest reports.
Thanks to an ongoing drought, the International Coffee Organization (ICO) sees global production falling short of demand next year.
Natural Gas
The gaseous commodity ambled 8.2% higher as investors factored in relatively low inventories and the looming winter heating season. However, most of the natural gas gains have come in just the past week. That’s because the NOAA is forecasting warmer than average temperatures for the Eastern US over the next 6-10 days.
Lumber
Investors recently found new home construction soared to an 8-month high in July.
What’s more, housing starts popped 15% from June, rising to a seasonally adjusted rate of 1,093,000- well above the consensus estimate of 965,000. Thanks to all this bullish information, investors sent lumber rallying 6.5% in August.
Rounding out this month’s gainers are wheat, cotton, and palladium with gains of 6.9%, 2.7%, and 1.9%.
And now for the worst performers…
Lean Hogs
After PEDv fears pushed lean hogs to all-time highs of $1.32 a pound in early July, Russian President Vladimir Putin brought the commodity plummeting lower by 22.2% in August.
How did he do it?
In response to US sanctions on Russia, the delirious dictator countered by prohibiting imports of US food products. Since Russia is a big importer of US pork, demand for the commodity quickly sank.
Soybeans
With the USDA forecasting a record soybean crop this year, it’s not altogether surprising to see soybeans trading at multi-year lows. Near perfect planting and growing conditions this spring and summer are expected to produce 3.8 billion bushels this crop year, an all-time high.
Thanks to ample supply forecasts, soybeans dropped nearly 10% this month.
Sugar
This sweet commodity has cratered 7.9% since the end of July. Once again, abundant global supply is the prime culprit.
Silver
Hawkish language from the Federal Reserve sent silver careening lower by 5.4%. As you’ve likely heard, the Fed is expecting to raise interest rates sometime in the first quarter of 2015. As a result, investors are sending the US Dollar higher, which in turn quells demand for silver.
Rounding out the month’s top decliners are platinum, feeder cattle, and copper with losses of 4.4%, 1.5%, and 3.6% respectfully.
There you have it…
As you can see, it was another gloomy month for overall commodity performance. However, that doesn’t mean there aren’t profit opportunities going forward. I’m particularly excited about the potential upside in coffee!
Until Next Time,
Justin Bennett
Category: Commodity Trading
